Recently I had some down time, so I watched a 2006 movie I’d had on my list called “Stranger Than Fiction.” It stars Will Ferrell as an IRS agent named Harold who audits, and falls for Ana, a bakery owner, played by Maggie Gyllenhaal. Now, you don’t get a lot of movies with IRS agents in them, and even fewer where the agent is the lead character. But this was a mildly interesting diversion, which got even more interesting — from a tax standpoint, at least — at two specific places.
The first was where Harold is in the back room at the bakery. Ana brings in a box full of random receipts and envelopes, and drops them in front of Harold. The conversation goes like this:Harold: What’s this?Ana: My files.H: What?A: My tax files.H: You keep your files like this?A: No, actually I’m quite fastidious. I put them in this box just to screw with you.I thought this was interesting, because if you’re going to be audited, it’s probably not a good idea to antagonize the auditor. That’s just common sense. But if an auditor can’t easily find documentation for an expense, he or she might be inclined to disallow it, throwing the burden of proof back on to you. So, first takeaway from this scene (and proof that a financial professional wasn’t involved in the screenplay) is: keep your records organized.
The second scene was at a tender moment between Harold and Ana, where Harold tells her that all the food she’s been giving away is tax deductible as a charitable contribution. I might have to qualify this if there’s a back story to this remark that wasn’t obvious, BUT we see Ana earlier in the film giving coffee and a Danish to a person who appears to be homeless. If that’s what they’re talking about, no, that is not deductible, for reasons I pointed out in the last post. Now, if she’s donating baked goods to a registered 501c(3) charity, it’s possible that she could donate the fair market value of the donations on her tax return. But not if it’s going to an individual instead of a charity.